Sunday, 8 September 2013

Surprise and disappointment this
morning on reading a report that Marks and Spencer is planning to make hundreds
of its suppliers wait nearly three months to be paid.

It’s suggested that the change
will generate tens of millions of pounds of cashflow benefits for M&S but
it justifies the lengthening of its payment terms from 60 to 75 days as bringing
it "in line with industry standards”.

M&S has been regarded by many
in this country over the years as an example on the high street, consistently
delivering decent quality at a reasonable price and doing it ethically. Still
the company can point to a CSR policy that demonstrates commitment to making a
few quid without treading on heads.

This is a clumsy move at a time
when there is much (welcome) talk about “green shoots”. The survival and growth of small business
remains a vital ingredient of that recovery.

Yesterday, I read a cuddly
brochure from Lloyds Bank, as it is to become (no TSB), about how it aims to
support the future of Britain etc with its new deal for banking customers. All
good stuff, but we’re a long way off yet and I don’t see a general enthusiasm
from the high street banks to lend to the sort of small businesses that depend
on these big names.

Prompt payment to suppliers is
vital in current economic conditions and will remain so. My firm committed some
time ago to the Prompt Payment Code
promoted by the Institute of Credit Management – a step that required evidence
of compliant practice, not simply noble promises.

Why not? With interest rates as low as they have been
for so long, there’s little to be earned short-term from holding onto the money.
Longer-term there is far more to be
gained from maintaining healthy relationships with suppliers.

Some will say it’s beyond their
control because of delays in payment further up the chain. It’s difficult to
see that this is relevant to a retailer that receives payment as the goods
change hands. Next reportedly pays
after 30 days.

In his letter to suppliers the
executive marketing director is reported to have professed “We believe that parity and clarity in our terms of trade are important to all our suppliers and will help our businesses in the long term." He also acknowledged that there “may
be some questions.”

Here’s one - why this seemingly
short-sighted and selfish stunt by a flagship of the UK economy?

It’s out of character and
badly-timed. It doesn’t fit. It’s one
for the “returns” desk guys.